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Monday, July 12, 2010

How CSOs can merit a seat at the strategy table.

Whether a CSO has a seat at the strategy table of the company can easiest be detected in his/her possibility to influence the company's revenue growth target. A CSO to whom the target is handed down by the CEO or CFO with comments such “just make this number and I don't really care how you do it” certainly does not have a seat at the strategy table.

This absence from the strategy table, in my view, is though the first root cause for the deterioration of sales effectiveness. Especially over the last two years, we have seen how this kind of revenue target setting, solely focused on shareholder value maximization, leads to unrealistic quotas. In consequence, fewer sales people will reach their quota (a major sales effectiveness indicator). The effect is exacerbated by the fact that sales people, seeing not the faintest chance to attain those unrealistic targets become demotivated and do stop trying to reach quota which leads to further deterioration of performance.

Yet a seat at the strategy table needs to be merited; especially when any recommendation by a CSO for a more moderate revenue growth target is interpreted by the superiors as an attempt to make it easier for him/her and the troops to reach full quota and therefore to earn the full variable part of their compensation.

As I am convinced sales performance can only be sustainably improved by inducing new thinking right at the top of a company, I am constantly looking for ideas how CSOs can gain a seat at the strategy table. Such an idea is presented in a paper I submitted to the fourth annual conference of the Global Sales Science Institute (GSSI). In this paper, I demonstrate how Sales can make available a piece of strategic information which is key to help their company to determine how to arrive at sustainable revenue growth.

For an innovative company it is clear that sustainable revenue growth requires the chaining of product life cycle curves, which take the shape of S curves. To determine the point in time, (the curve's tipping point) when a next S curve has to be chained to the the currently exploited one, is though less trivial. In my paper, I show that it is not Product Marketing - whom you would expect being in charge of the product life cycle -but Sales who is best positioned to detect accurately the tipping point of the currently exploited S curve.

However, this can not be done by tracking and forecasting revenue over time, which is what the S curve does. One has to look at the innovation adoption curve. There is a mathematical relation between the two curves and it becomes pretty obvious that the tipping point is reached where the people belonging to the early majority of customers give room to those belonging to the late majority (see graph above). Sales could be the first to notice this. People belonging to the late majority in the innovation adoption curve have a different buying motivation than those in the early majority. However to detect this crucial strategic information, sales leaders cannot just chase revenue and beat on the forecast. They have to ask an additional simple question to their team: “Did you detect any recent change in the buying motivation of your customers/prospects”.

This question does not only help detect this strategic indicator of the tipping point, but it also helps ensure, that sales people use a value proposition adapted to the late majority and thus immediately increase sales success.

Although it is a rather theoretical paper, it has very practical implications helping CSOs to demonstrate at least one crucial strategic aspect of their role. I cannot imagine any CEO or CFO not being interested in sustainable revenue growth and in guidance when actions should be taken to pursue this goal. (Hint: It is much earlier than they probably would expect). CSOs being able to provide such crucial information might thus have it a little easier to be invited to the strategy table.

If you are interested in the paper you can ask for a copy via this link. As a bonus, you will receive also a copy of the poster by which the concept was presented at the conference.